Kicking off November on a sour note, Treasuries fumbled lower as data eclipsed optimistic forecasts once again and Friday's month-end bid evaporated. ISM climbed to 57.0 in October, well above 53.7 last and a 55.4 median, with all of its components equally firm. Construction spending thrived in a low-rate environment, led by private spending and lodging, surging 1.3% to the highest rate on record from upwardly revised gains in August and July. Auto sales were the only disappointment, with October sales near 15.7 million units -- 5% lower than previously.
Treasuries mostly just eroded over the course of the session, grinding lower following the data and only supported late in the session by weak autos and the latest bombings near U.S. headquarters in Iraq. Stocks also put in a solid session, supported by a Semiconductor Industry Association chip sales report and optimism from IBM and Sun Microystems that helped the Nasdaq reap a 1.7% gain and fresh cycle highs.
The December bond closed 18/32 lower at 108-05, but well above early losses of nearly a point. The 2-year note and 30-year bond spread finished 3 basis points flatter at +328 basis points, as the front-end underperformed on strong U.S. growth prospects and Fed factoring. Gold fell $9 to $376 an ounce as the dollar made a strong comeback with the data.